Pacific Investment Management Co. urged a state court on Monday to dismiss the wrongful termination claim of its co-founder and former star portfolio manager, Bill Gross, calling the suit “a legally groundless and sad postscript to what had been a storied career.”
In a 20-page motion, Pimco said Gross had engaged in “a pattern of conduct that was incompatible with the values and standards that Pimco expected of those entrusted with its leadership.” It alleged he resigned of his own accord when the Newport Beach bond firm demanded he adhere to them.
“This suit is only the latest step in Mr. Gross’ effort to resurrect a personal reputation damaged by his own unacceptable behavior,” the motion said.
In a statement, Gross’ lawyer, Patricia L. Glaser, said: “We are disappointed that Pimco has chosen to use a procedural tactic to delay getting to the merits of the case, but are confident in our case moving forward. Notably, Pimco’s papers do not dispute the substance of Mr. Gross’ allegations in any material way.”
Pimco’s motion is the latest in an ongoing war of words between Gross, the globally famous investor once known as the “bond king,” and the giant investment firm he cofounded more than four decades ago.
The public dispute spilled into public view in early 2014 with the resignation of Gross’ presumed successor as Pimco’s sole chief investment officer, Mohamed El-Erian. It accelerated with the abrupt departure of Gross in September 2014 and his lawsuit, filed last month in Superior Court in Santa Clara.
The feud has been enormously costly for Pimco, which has seen its flagship bond fund, Total Return, plummet to $93.7 billion under management as of the end of October from a peak of nearly $293 billion in April 2013. The outflows have tapered in recent months but Gross’ scathingly worded lawsuit has raised the specter of renewed investor defections.
Gross’ suit accuses current and former Pimco executives of leaking disparaging information and ultimately engineering his ouster last year. The complaint, which alleges breach of contract, calls his opponents “money-driven” and a “cabal” of “conspirators” motivated by “greed” in their goal to oust him and take his share of Pimco’s enormous bonus pool.
Among other things, Gross alleges that Pimco executives refused to honor a verbal agreement he had reached with Michael Diekmann, chief executive of Pimco’s parent, German insurance giant Allianz, for a sharply reduced role at the firm. Until now, Pimco has confined its public statements about the litigation to a brief and dismissive news release when the suit was filed last month.
But Pimco has signaled how seriously it takes the case by hiring the Washington law firm of David Boies, a renowned litigator known for high stakes corporate and securities cases. In its motion to dismiss, Pimco mocked Gross’ complaint, saying it “reads more like a screenplay than a court pleading,” and said its “irrelevant and false personal attacks” on Gross’ former colleagues were untrue.
In any event, it claimed the lawsuit failed to state a viable legal claim. The motion said that Gross’ complaint “fails to sufficiently allege the existence” of any verbal deals and fails to allege any breach of the written contract he had with the firm.
“Pimco has moved forward since Mr. Gross’ resignation,” the motion said. “It is time for him to do the same, instead of treating this court as a forum to engage in the kind of reputational warfare embodied in his legally groundless complaint.”